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4 Student Debt The Class of 2013 is the most indebted ever with 70% of graduates carrying an average debt of $35,200 1 It’s easy for students to get overburdened. 70% 1. “Cost-Conscious College Graduates: A Study of Recent College Graduates.” Fidelity Management and Research LLC

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9 Types Of Credit Installment LoansRevolving Lines of Credit Specified amount of money is borrowedAgreement by lender (e.g. bank, credit union) to lend specified money Purpose and repayment terms are both defined Money can be accessed at any time to pay for anything Each payment reduces loan balance and loan is closed when balance reaches zero As payments are made on balance, that amount frees up for more spending Examples: Car Loan, mortgage, student loans Examples: Credit cards, store charge cards, lines of credit Institute for Financial Literacy, 2010

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10 Fixed/Adjustable Interest Rates  Fixed interest rate  Stays the same for the life of the loan  Adjustable interest rate  Changes with certain factors  Check when it changes (monthly, yearly)  Check what the interest rate is based on (e.g. LIBOR + 2%)

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22 Payment History  Are you paying on time?  Number of days delinquent?  How long since your last delinquency?  How many accounts are delinquent?  How much did you owe? POTENTIAL IMPACT:  YES for all loan types  Drop (or gain) in credit score POTENTIAL IMPACT:  YES for all loan types  Drop (or gain) in credit score

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24 Length Of Credit History  How long have you had your account(s)? POTENTIAL IMPACT:  YES for all loan types  Gain in credit score for additional time accounts are held POTENTIAL IMPACT:  YES for all loan types  Gain in credit score for additional time accounts are held

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25 Type Of Credit Used  Do you have a mix of installment and/or revolving credit?  Student loans = installment  Credit cards = revolving POTENTIAL IMPACT:  YES for all loan types  Gain in credit score for having a variety of credit types POTENTIAL IMPACT:  YES for all loan types  Gain in credit score for having a variety of credit types

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26 New Credit  Have there been recent credit inquiries on your account?  How many recent accounts have you opened? POTENTIAL IMPACT:  YES for PLUS or private loans  NO for Direct/Perkins  Possible drop in score (although minor as it relates to credit inquiries) POTENTIAL IMPACT:  YES for PLUS or private loans  NO for Direct/Perkins  Possible drop in score (although minor as it relates to credit inquiries)

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29 Most Important Factor: Paying On Time  What education are you providing on:  For all debt:  The importance of on time payments  Ways to make on time payment more likely (auto-debit, calendar reminders, etc.)  The benefits of “good debt” and “good credit”  For Federal student loans in particular:  Repayment options  Deferment/forbearance options  Forgiveness options  How to find who to contact and/or resources to help you